Are you prepared for every possible mishap your company could encounter? Chances are the answer is no. And that’s just fine, so long as you’ve prepared a plan for some of those potential hurdles.
No one can foresee and prevent every possible issue a business may face, but having an agreed-upon plan in place from the start can help you and your business partners tackle many of the common problems that lie ahead.
Whether you’re establishing a general partnership, limited liability company (LLC) or a corporation, you will need a detailed agreement in place. Your agreement should fit the needs of your company and lay out a plan with as much guidance as needed for sustainable growth.
What to include
Every business agreement differs to some degree based on the parties involved, but there are a few key elements you should address, including:
- What are the assigned duties for each founder?
- How will decision-making happen amongst the owners?
- Who can add or withdraw capital from the business?
- What happens if a founder wants to leave the business?
- Can the company buy back a founder’s shares if they leave? At what price?
The agreement should detail the division of responsibilities and expectations for decision-making to ensure each person knows what is expected of them and what to expect from others. Businesses save valuable time by addressing these details at the forefront instead of waiting until an obstacle appears.
The above list is by no means exhaustive, so it’s important to consult with your partners and professionals to ensure your agreement includes everything your business needs. A detailed agreement can help solve disagreements before they start. A binding agreement signed by all parties serves as a guidebook for business operations and mitigates potential fallout if a conflict arises.
Including dissolution details
It’s hard to imagine a business relationship ending when you’re just starting out, but it’s in your best interest to prepare for the worst as soon as you can. A contingency plan should be in place at the beginning of the business in order to address potential conflicts between partners or shareholders.
If tensions have already mounted, trying to solve a dispute will only further exacerbate a dissolving business relationship. Your business shouldn’t falter because of changing relationship dynamics. This is among the many obstacles you can prepare for in the beginning of a business venture.
There are many unknowns, so give your business the advantage of addressing the known possibilities and lessening the unknowns through a business agreement that fits your needs.